SOCIETY OF PETROLEUM ENGINEERS OF AIME
6300 North Central Expressway
Dallas 6, Tex.
PAPER 1 4 4 4 - G
NUMBER
THIS IS
A PREPRINT --- SUBJECT TO CORRECTION
OIL AND GAS SECURITIES
By
Gilbert H. La Piere, Associate Member AIME
W. E. Hutton
& Co., New York City, N. Y.
Publication Rights Reserved
This paper is to be presented at the AIME Annual Meeting of the Society of Petroleum Engineers of
the American Institute of Mining, Metallurgical and Petroleum Engineers in New York City, Feb. 14-18,
1960, and is considered the property of the Society of Petroleum Engineers. Permission to publish is
hereby restricted to an abstract of not more than 300 words, with no illustrations, unless the paper
is specifically released to the press by the Editor of the Journal of Petroleum Technology or the
Executive Secretary of SPE. Such abstract should contain appropriate, conspicuous acknowledgment of
where and by whom the paper is presented. Publication elsewhere after publication in Journal of
Petroleum Technology is granted on request, providing proper credit is given that publication and the
original presentation of the paper.
Discussion of this paper is invited. Three copies of any discussion should be sent to the
Society of Petroleum Engineers office. Such discussions may be presented at the above meeting and
considered for publication in Journal of Petroleum Technology with the paper.
A
consensus of various petroleum economists
RECENT .TRENDS IN OIL
indicates that oil and natural gas will supply
75 per cent of the energy used in the United
States by the year 1967 and that the growth in
Since May 1, 1957, oil shares have lost their
rank of leadership with investors. Until
recently, the public had invested more money in
demand in the U. S. will approximate
4 to 5 per
cent/year over the next decade. It is estimated
that demand will approach 14 million B/D by
1967 compared with approximately 9.5 million
B/D today; it is further estimated that the Free
World oil consumption will increase at an average
oil than in any other industry
- but today, oil
shares have slipped to third place behind utility
and chemical stocks. The current value of oil
common stocks approaches $43 billion, approxi•
mately the same value they had over
years ago
in May, 1957. In contrast, utility stocks moved
from $33 to $50 billion, and chemical stocks
moved from $30 to $46 billion over the same
rate of approximately 7 to 8 per cent/year, near•
ing 30 million B/D in 1967 compared with approxi•
mately 17 million B/D today.
period. Over the past
years, oils were one
of the major groups showing a decline in their
market price, dropping from 20 per cent of the
total value of all common stocks on the New York
Stock Exchange to today's figure of approximately
15 per cent of total value.
EXPENDITURES
According to the Chase Manhattan Bank,
capital outlay to meet the expansion needs of
the Free World petroleum requirements over the
next decade will reach $140 billion. This is
almost double the $72 billion spent for property,
plants and equipment during the past 10 years.
The majority of future outlays will be spent in
foreign countries because the rise in cost for
finding oil in the U. S. is sending the major oil
companies abroad in search for new oil. Foreign
expenditures will rise 140 per cent over that of
the past 10 years while domestic expenditures
will rise 70 per cent.
An investor should not be too alarmed at
these statistics because the oil industry has
undergone
a period of tremendous expansion
during its first 100 years, an expansion ac•
celerated particularly by the invention of the
automobile in the early part of the century.
Much of the gain in petroleum demand can be
credited to displacement of other fuels. The
exact extent of this displacement is not known,
but in 1920 oil and gas accounted for slightly
less than 18 per cent of the total energies used
in this country. By 1943 this rate had climbed
to 40 per cent, and in 1956 it had reached 67
per cent. Today, oil and natural gas supply 72
per cent of the energy used in the United States.
Over the past twelve years, capital expendi•
tures to find and develop oil in the U. S. have
consumed 75 per cent of the Free World's total
oil development cost, but this source has yielded
only 15 per cent of the new oil. Four times as